Taxing terminology

I write today about what political insiders call a messaging mistake President Obama and other Democrats have been making for years in talking about the Bush tax cuts:

The long-held Democratic position states that the Bush tax cuts must not be extended “for those earning more than $250,000 a year.” This is divisive, critics say, pitting the poor and middle class against the well-to-do. Besides, $250,000 a year doesnít sound super-wealthy here in Massachusetts.

In addition to being divisive and scary, the typical formulation of President Obamaís position is inaccurate. Income tax rates are marginal, which means they apply not to all the earnings of individual filers, but to adjusted earnings above a certain level.

Thus, it would be more accurate, and more politically palatable, to put it this way: Under the presidentís plan, every taxpayer will be treated the same. The first $250,000 of a coupleís taxable income will be taxed at the Bush rates. Income over $250,000 will be taxed at the previous, Clinton-era tax rates.

Doesnít that sound less onerous?

I have no idea how they’ve gotten this so wrong.† Elizabeth Warren used the typical formulation when I spoke with her in October, and I explained my position.† “I never thought of it like that,” she said. “I’ll use that.”

I haven’t heard her use it yet, but there’s time.

I write today about what political insiders call a messaging mistake President Obama and other Democrats have been making for years in talking about the Bush tax cuts:

The long-held Democratic position states that the Bush tax cuts must not be extended “for those earning more than $250,000 a year.” This is divisive, critics say, pitting the poor and middle class against the well-to-do. Besides, $250,000 a year doesnít sound super-wealthy here in Massachusetts.

In addition to being divisive and scary, the typical formulation of President Obamaís position is inaccurate. Income tax rates are marginal, which means they apply not to all the earnings of individual filers, but to adjusted earnings above a certain level.

Thus, it would be more accurate, and more politically palatable, to put it this way: Under the presidentís plan, every taxpayer will be treated the same. The first $250,000 of a coupleís taxable income will be taxed at the Bush rates. Income over $250,000 will be taxed at the previous, Clinton-era tax rates.

Doesnít that sound less onerous?

I have no idea how they’ve gotten this so wrong.† Elizabeth Warren used the typical formulation when I spoke with her in October, and I explained my position.† “I never thought of it like that,” she said. “I’ll use that.”
I haven’t heard her use it yet, but there’s time.